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#1 17-07-2020 13:51:14

johnedward
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From: Paris - France
Registered: 21-12-2009
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EUR/USD: a European summit with major stakes

EUR/USD: a European summit with major stakes


The eurodollar peaked at the top of its current channel, following the outcome of a Governing Council meeting which came as no surprise, and as a decisive European summit opens.

As expected, the ECB left its support program for the European economy and rates unchanged at the lowest level. The monetary institute also urged EU leaders to "quickly" agree on an "ambitious" recovery plan (the words are from the institution's boss, Chrissie Lagarde) in the face of the economic impact of the pandemic, on the eve of an EU summit on the subject with a very uncertain outcome. It should be noted that this was the last monetary policy meeting of the Frankfurt institution before the summer break.

The ball is now in the court of the countries themselves, and of their ability to agree on fiscal stimulus despite differences in funds, between Germany and France on the one hand, and the "frugals" on the other (the Netherlands, Denmark, Sweden, Austria in the lead). This Friday, a European summit opens with the adoption of the 750 billion recovery plan at stake.

On the macroeconomic front, there was a pleasant surprise yesterday morning, with the trade surplus in the Euro zone for May, which, although timid, exceeded expectations by 3 billion. Across the Atlantic, retail sales (excluding automobiles) for June rebounded strongly, by +7.4% on a monthly basis, above expectations, and the Philly Fed Manufacturing Index (Philadelphia Fed Manufacturing Index) also came out above expectations, at 23.9. Little deviation from the consensus to be reported regarding weekly jobless claims, which, at 1,300,000 for week 28, rose only slightly.

Eurozone inflation data for last month came as no surprise. Excluding food, energy, alcohol and tobacco, EuroStat confirmed at +0.7% the annualised increase in prices.

To be followed this afternoon on the other side of the Atlantic, the consumer confidence index (University of Michigan), in preliminary data at 16:00.

Right now, the pair is trading at $1.1419.

MEDIUM TERM FORECAST

In view of the key chart factors we have mentioned, our opinion is negative in the medium term on the EUR/USD's exchange rate.

Our entry point is $1.1416. Our target price for our bearish scenario is $1.1251. To preserve the capital employed, we advise you to position a protective stop at $1.1453.

The expected return on this forex strategy is 165 pips and the risk of loss is 37 pips.

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